As rising labor expenses take an increasingly bigger bite out of property revenues, hotel companies are controlling the impact with business intelligence (BI) tools that provide new visibility into operating costs and profitability. At most properties tracking labor costs is handled by automated time and attendance systems, but calculating labor as a percentage of revenue is still primarily a manual operation. However, automated solutions that integrate data from third-party time and attendance and property management systems (PMS) are adding greater awareness of the role labor costs play across hotel groups. Labor is the largest controllable expense for hoteliers, so fast response to inappropriate labor costs is enabling operators to make better decisions on staffing that improve profitability.
ZMC Hotels in Duluth, Minnesota, is one company achieving results with the help of BI labor data analysis. By using BI to automate the integration of daily labor costs and revenue data, ZMC has achieved significant results that include:
á A 60% decrease in overtime expenses
á A $4 reduction in daily costs per rented room
á Creation of labor expense reports in less than half the time of manual processes.
ZMC uses a Business Intelligence (BI) system designed for the hospitality industry called Execuvue‰ from Aptech Computer Systems. “The system takes our PMS statistical and revenue information and combines it with payroll data to produce what we call our ‘monster report’ that shows our overall labor expense as a percentage of revenue and the cost-per-room across our 36 properties,” said Stacey Lange, accounting supervisor for ZMC. “The system performs a three-dimensional data analysis process that enables us to see our expenses and revenue in one place and ranks our properties on performance and correct labor expense variances weekly before they snowball at month end.”
ZMC also uses BI to assess overtime expenses for each property. “Our reports rank our hotels by the percentage of payroll expenses to revenue per property,” said Raija Macheledt, chief financial officer for ZMC. “It is a very powerful measurement because we are constantly striving to schedule work so staff does not have to use overtime. The report tells us how well our managers are actually meeting that goal from department to department.”
The reports are light years ahead of the old process of manually assembling overtime data in an Excel spreadsheet—the way ZMC used to do things before implementing Execuvue. “It used to take two weeks after a payroll period ended to produce a report,” said Lange. “Now supervisors can react more quickly because they have the reports three to five days after the payroll period ends. As a company, we’re more in tune with what our properties are doing and can manage them better. Plus, the data is more accurate because we have eliminated keying errors.”
With mostly limited service hotels in its portfolio, ZMC has used Execuvue’s reports to achieve the $4 reduction in daily cost per rented room, chiefly by reducing overtime costs in housekeeping and laundry. The solution’s ability to combine data from multiple sources makes such a reduction possible. “Another hotel company that uses Execuvue takes month-to-date occupied room data divided by total labor hours worked to arrive at a percentage that is used to benchmark productivity across all their hotels,” said Cam Troutman, director of sales for Aptech.
“The best time and attendance systems deliver multiple reports by person, by hour, and other measures, but these systems do not have the ability to calculate productivity by occupied room and room revenue because they do not have this information from the PMS,” Troutman said. “Operators want to ‘mash these things together’ to measure productivity and maximize their revenue flow-through. This is one of the primary strengths of a BI system.”